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The University of Warwick
Executive Summary and Recommendations
This Report examines
how the multilateral trade
regime can better serve the
global community.
It does so by asking if the sustained and uneven
transformation of the global economy, with
the associated rise of new powers, heightened
aspirations, and considerable pockets of
societal discontent, require a reconsideration
of the principles and practices that currently
guide the multilateral trade regime, the core of
which is the World Trade Organization (WTO).
Having considered this question, the Warwick
Commission sees five challenges facing the
multilateral trade regime – challenges that can
be addressed more effectively than at present
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if the steps proposed here are taken. Our
approach is guided as much by the practical
realities of the contemporary trading regime as
it is informed by analyses of long-term trends
and national and regional circumstances.
We recognise – and indeed owe a debt to – prior
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reports on the multilateral trade regime.
The Warwick Commission Report is entirely
independent and its only institutional link is
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with the University of Warwick. We believe
our Report offers fresh perspectives on the
future trajectory of a critical element of global
governance – the management of global trade
relations. We do not claim originality for all
our recommendations. Where we have not
been original it is because we are convinced
that some old ideas are badly in need of
resurrection in the face of current challenges
confronting the multilateral trade regime.
Moreover, not all our recommendations carry
equal weight in terms of their impact on the
system, were they to be adopted.
Five challenges must be met if the multilateral
trade regime is to succeed in the early 21st
century. These challenges are distinct yet
often related, and we do not seek to prioritise
them. Taken together, they arise from several
sources: national political dynamics, global
economic developments and inter-state
diplomacy. The five core challenges we identify
are as follows:
The Warwick Commission
• The first challenge is to counter growing
opposition to further multilateral trade
liberalisation in industrialised countries.
This tendency threatens to render further
reciprocal opening of markets unduly
limited and to weaken a valuable
instrument of international economic
cooperation.
• That the bipolar global trade regime
dominated primarily by the United States
and Western Europe has given way to a
multipolar alternative is now an
established fact. The second challenge is
to ensure that this evolving configuration
does not lapse into longer term stalemate or
worse, disengagement.
• In this changing environment, the
third challenge is to forge a broad-based
agreement among the membership about
the WTO’s objectives and functions,
which in turn will effectively define the
“boundaries” of the WTO.
• The fourth challenge is to ensure that
the WTO’s many agreements and
procedures result in benefits for its weakest
Members. This requires that the
membership addresses the relationships
between current trade rules and fairness,
justice, and development.
• The fifth challenge relates to the
proliferation of preferential trading
agreements and what steps can be taken to
ensure that the considerable momentum
behind these initiatives can be eventually
channelled to advance the long-standing
principles of non-discrimination and
transparency in international commerce.
An integrated, comprehensive and systemic
response is called for; key elements of which
are discussed in the Report. A recurring theme
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in a number of our recommendations is the
need for stakeholders in the trading system to
permit themselves the time and space to take
a step back from negotiating, litigating and
running the daily business of trade policy in
order to reflect on how they would like to see
the trade regime evolve over the next few years.
An inter-governmental ‘reflection exercise’
of this nature would seek to identify diverse
needs and common interests, and to inject
greater legitimacy, order and dynamism into
the multilateral trade regime. Reflection and
dynamism are not contradictory terms. An
inter-governmental reflection exercise, we
believe, would be best instigated sooner rather
than later.
A brief account follows of the contents of
each chapter of this Report, together with the
recommendations contained therein. This
brief summary cannot, of course, substitute
for the nuanced and more detailed reasoning
in the Report. In laying out the contents and
conclusions of the Report, the Commission
also acknowledges that a Report of this
nature cannot aspire to completeness. We
have selected a range of issues we consider
important, but we are acutely aware of many
other issues in need of attention, related to
trade but always with wider socio-political and
economic ramifications. It is our hope that
a reflection exercise of the kind we propose
would be able to address some of these issues
along with the ones we identify.
Chapter 1 of the Report assesses the
implications for the multilateral trading
regime of the changing political and economic
landscape both within nations and between
them. Two striking observations, expressed as
affirmations, relevant to policymakers follow
from our analysis of the context facing the
multilateral trading regime in the early
21st century.
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The University of Warwick
• Waning public support for the further
opening of economies, which is particularly
evident in many industrialised countries,
now seriously threatens the conclusion
of future trade agreements and the
maintenance of orderly, rules-based
international trade relations. National
political leaders have often failed to
explain adequately to the public what
is at stake. Instead they have preferred
silence, or worse, the politics of blame and
responsibility avoidance. Governments must
look beyond the electoral cycle and confront
more directly the vested interests that
benefit from protection and the inefficiency
it breeds. Enhanced efficiency is, however,
but one element in the equation of economic
change. At the same time, governments
must pay more serious attention to the
distributional consequences of change.
• Sustaining the WTO is the collective
responsibility of all its Members, in
particular both the longstanding and the
new poles of power and influence in the
world economy. The parties concerned must
reach an accommodation and act upon
their common interests, as failure to do so
risks paralysis at the WTO and the de facto
disengagement of some Members. While
such efforts are clearly in the common
interest, it will be the smallest and weakest
members of the international community
that would suffer most from this failure.
Chapter 2 of this Report begins with a
short discussion of the role of multilateral
institutions in sustaining cooperation
among nations. It then proceeds to examine
decision-making in the WTO, with particular
reference to agenda formation. The final part
of the Chapter focuses on the WTO’s Dispute
Settlement Mechanism (DSM). The specific
recommendations of this Chapter relate to
decision-making and dispute settlement.
1 It is no surprise that decisions about the
reach and content of WTO rules have been
among the most contentious issues in the
sixty-year history of the multilateral trading
system. The negotiating and rule-making
priorities established within the WTO
are a crucial determinant of how well the
institution serves the interests of its diverse
constituents. A core challenge is to shape
the agenda in a way that both respects the
interests of the entire membership while
at the same time securing the continued
commitment of all parties. In pursuit of this
balance, the Commission recommends that
consideration be given to the circumstances
in which a “critical mass” approach to
decision-making might apply. The key
implication of this approach is that not all
Members would necessarily be expected
to make commitments in the policy area
concerned. We are aware of the sensitivities
inherent in this proposition and have taken
care to spell out criteria that would need
to be met in adopting such an approach.
Among the criteria for considering a critical
mass approach to defining the agenda
are the need to identify a positive global
welfare benefit, to protect the principle of
non-discrimination, and to accommodate
explicitly the income distribution effects of
rule-making.
2 As far as dispute settlement is concerned,
the Report has focused on those aspects
of reform that could improve access to the
procedures for the smaller and weaker
Members of the WTO. In this connection,
the Commission recommends that Members
be given a right to the services of a Dispute
Settlement Ombudsman whose role would
be to mediate between potential disputants
upon the request of one party at a stage prior
to launching a formal complaint. Such a
procedure would allow recourse to the good
offices of an independent party prior to any
formal bilateral consultations.
3 The Commission is aware of recent
improvements that have been made
in enhancing the transparency and
accessibility of dispute settlement
proceedings and recommends that these
initiatives be sustained and strengthened,
particularly in relation to hearings that are
made open to the public and in allowing
the submission of amicus curiae briefs before
panels and the Appellate Body (AB).
The Warwick Commission
4 One of the greatest successes of the WTO
dispute settlement system, like that of the
General Agreement on Tariffs and Trade
(GATT) before it, has been the high degree of
compliant behaviour by Members in respect
of findings. Nevertheless, where Members
neither comply nor offer compensatory
trade policy action, the option for aggrieved
parties to take retaliatory measures is
neither attractive when seen against the
objectives of the WTO Agreement nor
feasible when small economies are pitted
against large ones. In light of this, the
Commission recommends that consideration
be given to WTO Members accepting an
obligation to provide cash compensation to
aggrieved parties where compliance or traderelated compensation is not forthcoming.
Reflecting the growing influence of developing
countries in the WTO and the increasing
importance attached to development
and developing country concerns at the
WTO, Chapter 3 of the Report is devoted to
considering how the WTO might be reformed
so as to benefit further its weakest Members.
We note that the impact of the multilateral
trade regime on developing countries is
influenced by effective export opportunities,
the choice of the negotiation set, the policy
design of negotiated outcomes and the manner
in which results are implemented. Following
a short discussion of links between trade and
development, the Report takes up the questions
of Special and Differential Treatment (S&DT)
and Aid for Trade (AfT).
5 Debate over S&DT provisions in the WTO has
been contentious and over-politicised and
the need for substantive analysis has often
been neglected. Critics of S&DT provisions
have characterised them as insensitive to
diverse conditions in developing countries,
often irrelevant to real development
needs, and over-reliant on best-endeavour
undertakings that are often disregarded.
The Commission recommends that efforts
be redoubled to design clear, concrete
S&DT provisions based on solid analysis
of development needs and cognisant of
the reality that differing needs among
developing countries call for differentiated
measures. The Commission commends the
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approach taken in the Doha negotiating
mandate on trade facilitation, where the
need for technical assistance and resource
support to undertake new trade disciplines is
linked to the ability do so. The Commission
also believes that the systemic aspects of this
issue should be taken up in the proposed
reflection exercise.
6 The Commission notes the importance of
increasing opportunities for developing
countries to benefit from trade through
improving physical infrastructure
and human capital, modernising and
streamlining administrative procedures,
and strengthening trade-related regimes
such as those dealing with product
standards. The Commission applauds the
AfT initiative and recommends that the
respective responsibilities of the WTO,
donor nations, potential recipient nations,
and the other international organisations
involved with this initiative be clearly
delineated. Failure to identify the locus of
respective responsibilities will weaken the
effectiveness of AfT and heighten the risk
that the WTO will be wrongly blamed for the
lapses of others. Thus each party should be
held accountable for its contribution to this
initiative, which should stand apart from
trade negotiations.
Chapter 4 of the Report covers the relationship
between multilateralism and regionalism,
a topical but vital issue in today’s trading
environment. Although the WTO remains
the centre of gravity of the multilateral trade
regime, the proliferation over the past 10-15
years of Preferential Trade Agreements (PTAs)
has raised pressing questions about the quality
of trade relations today and their likely future
directions in what few would regard as a stable
equilibrium. The Commission acknowledges
that PTAs are here to stay, but is of the firm
view that where feasible, the energy behind
such initiatives should be channelled towards
reinforcing accepted multilateral principles.
We make three specific recommendations in
this regard.
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The University of Warwick
7 The Commission believes that the very
rapid growth of PTAs in recent years
has unnecessarily raised trade costs and
carries worrying implications for the
world trade regime in terms of stability,
fairness, opportunity and coherence. The
Commission therefore recommends that as
part of a concerted response by governments
to this situation, current efforts to clarify
and improve disciplines and procedures
in relation to WTO provisions on Regional
Trade Agreements (RTAs) be intensified.
8 The Commission recommends that as
an expression of their commitment to
the multilateral trading system and
of a willingness to provide leadership
in maintaining and strengthening
international trade arrangements for the
benefit of all, the major industrialised
countries should refrain from establishing
PTAs among themselves. The Commission
also believes that large developing countries
with significant shares in world trade
should similarly refrain from negotiating
PTAs with each other.
9 The Commission recommends that WTO
Members strengthen and make permanent
the recently established Transparency
Mechanism (TM) for reviewing RTAs.
The Commission believes that this would
provide crucial support for an urgently
needed process of reflection, independent
of negotiations, to consider how to manage
the relationship between multilateral and
regional trading arrangements. In this
connection, the Commission recommends
that consideration should be given to
developing a mechanism that facilitates
collective surveillance of RTAs and possibly
the establishment of a code of best practices.
The themes of this Report are drawn together
very briefly in a concluding section. Given
that the multilateral trading system is at
a crossroads, the Commission perceives
an urgent need for a reflection exercise to
clarify and solidify the commitment of the
international community to a healthy, vibrant
and equitable multilateral trade regime. We
believe that this reflection exercise should be
open to all Members, should welcome inputs
from other interested stakeholders and should
examine the wide range of issues confronting
the multilateral trade regime. The terms of
reference of this reflection exercise should
include, but go beyond, the issues covered in
this Report. An emerging issue clearly in need
of attention is the relationship between climate
change and trade. In addition, we believe this
process should give particular consideration to
the manner in which the WTO’s surveillance
and monitoring function could be further
developed and given specific institutional form
and support, so that this function can assume
an importance comparable to the WTO’s
legislative and judicial roles.
10The Commission therefore recommends that
a process of reflection be established in the
WTO, led by the Chairman of the General
Council and/or the Director-General, to
consider the challenges and opportunities
facing the multilateral trading system and
to draw up a plan of action to address them.